The financial sector isn't the powerhouse of the UK economy. It's more like a Wendy house

HMRC figures show a drastic reduction in Corporation Tax contributions since the financial crash – on average just £3.3billion a year, even when the paltry Bank Levy is included. To put this in context, the finance sector shelled out £14 billion in bonuse

Five years ago today, following a frantic weekend of negotiations, during which Alistair Darling later admitted cash machines were within hours of being switched off, the Government announced that British banks would be part-nationalised to stave off collapse. We bought an 82% stake in RBS and 40% in Lloyds/HBOS at a combined cost of £37 billion. 

It was part of a wider bailout package which cost £132.89 billion of public money – the equivalent of £2,000 from each man, woman and child in the UK. Former Governor of the Bank of England Mervyn King quipped a year later: "To paraphrase a great wartime leader, never in the field of financial endeavour has so much money been owed by so few to so many.”

Half a decade later and the situation has changed little. According to the most up-to-date figures from the National Audit Office, £118.86 billion (or 89 per cent) of the original bailout is still outstanding. The interest payments alone cost the public purse £5 billion a year. Whilst some of the costs are recouped through the Government charging banks interest and fees, the NAO estimates it has still amounted to “a transfer of at least £5 billion from taxpayers to the financial sector” since the crisis.

There are others reasons the many are still propping up the few. Take for instance the 'too-big-to-fail' subsidy, whereby banks can borrow money cheaply because creditors know the Government (read: taxpayer) will bail them out if things go wrong. It's worth a fortune - £235 billion to Britain's four biggest banks between 2008-2011, according to research by the New Economics Foundation.

Or look at financial service's incongruous exemption from VAT. It's understandable that some items are VAT-free, for example: children's clothes, public transport, medical and funeral costs; but why are we exempting the services of a derivatives trader? According to HMRC itself, this anomaly costs us another £5bn a year. The International Monetary Fund has warned this special treatment of the banking sector means it is under-taxed and has allowed it to grow “too large”. 

Banks have also become adept at gobbling up public money intended for the real economy. This not only artificially inflates their profit and pay, but acts as a tourniquet on growth. Despite having drawn down £17.6bn since the Funding for Lending Scheme began just over a year ago, banks' lending to business contracted by £2.3bn.  

The cumulative effect is that banks live in a welfare dependent bubble, cushioned from feeling the effects of the crisis they caused. Financial sector growth has far outstripped the rest of the economy since the crisis: in 2012 for example, if you take out the fines and the one-off costs of adjusting to regulatory changes, the profits of the five biggest banks' rose 45% to £31.5 billion. The economy virtually flat-lined during the same period.

Yet whilst the financial sector likes to think of itself as the powerhouse of the UK economy, in terms of the tax it pays, it's more of a Wendy house. HMRC figures show a drastic reduction in Corporation Tax contributions since the financial crash – on average just £3.3billion a year, even when the paltry Bank Levy is included. To put this in context, the finance sector shelled out £14 billion in bonuses to top staff last year alone.

Meanwhile, the public have paid in service cuts, job losses and tax rises. Government spending will be cut by 9.1%, £141bn in real terms, during the course of this Parliament, chronically impacting on the poorest who rely on services most. Whilst the top rate of tax was cut, giving millionaires a tax break, the VAT increase to 20% has been shown to hit the poorest 10 per cent of the population more than twice as hard as the richest 10 per cent.

This stark injustice has prompted other countries to take action. It is the explicit reason why Germany, France, Italy, Spain and seven other European countries are implementing the Financial Transaction Tax of between 0.1% - 0.01% on stocks, bonds and derivatives that will raise up to £30 billion. It is the only policy to have emerged post-crisis that will ensure those responsible pay to clean up the mess they caused.

Unfortunately, the UK Government has not only refused to join in, but has taken the proposal to the European Court of Justice. It's a worrying indictment of their priorities, compounded two weeks ago when they launched another legal challenge, this time against the EU banker bonus cap. This was followed by news that the Government is scrapping the 1 per cent pay rise due to NHS staff in April. As an example of misplaced priorities it is difficult to beat.

Unless of course you look at ministers’ treatment of the poorest – the bedroom tax, benefit cap and punitive sanctions for those who miss Job Centre appointments - these policies are all signs that the coalition is determined to end what they call ‘the something for nothing’ culture. It’s a shame they won’t apply the same logic to bankers.

A protestor from the 'Robin Hood Tax Campaign,' dressed as 'Robin Hood,' holds a fake budget box above the Houses of Parliament. Image: Getty

Simon Chouffot is a spokesperson for the Robin Hood Tax campaign and writes on the role of the financial sector in our society.

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For 19 minutes, I thought I had won the lottery

The agonising minutes spent figuring out my mistake paired beautifully with hard, low wisdom tooth throbs.

Nineteen minutes ago, I was a millionaire. In my head, I’d bought a house and grillz that say “I’m fine now thanks”, in diamonds. I’d had my wisdom tooth (which I’ve been waiting months for the NHS to pull the hell out of my skull) removed privately. Drunk on sudden wealth, I’d considered emailing everyone who’s ever wronged me a picture of my arse. There I was, a rich woman wondering how to take a butt selfie. Life was magnificent.

Now I’m lying face-down on my bed. I’m wearing a grease-stained t-shirt and my room smells of cheese. I hear a “grrrrk” as my cat jumps onto the bed. He walks around on my back for a bit, then settles down, reinstating my place in the food chain: sub-cat. My phone rings. I fumble around for it with all the zeal of a slug with ME. Limply, I hold it to my ear.

“Hi,” I say.

“You haven’t won anything, have you” says my dad. It isn’t a question.

“I have not.”

“Ah. Never mind then eh?”

I make a sound that’s just pained vowels. It isn’t a groan. A groan is too human. This is pure animal.

“What? Stop mumbling, I can’t hear you.”

“I’m lying on my face,” I mumble.

“Well sit up then.”

“Can’t. The cat’s on my back.”

In my defence, the National Lottery website is confusing. Plus, I play the lottery once a year max. The chain of events which led me to believe, for nineteen otherworldly minutes, that I’d won £1 million in the EuroMillions can only be described as a Kafkaesque loop of ineptitude. It is both difficult and boring to explain. I bought a EuroMillions ticket, online, on a whim. Yeah, I suffer from whims. While checking the results, I took a couple of wrong turns that led me to a page that said, “you have winning matches in one draw”. Apparently something called a “millionaire maker code” had just won me a million quid.

A

Million

Quid.

I stared at the words and numbers for a solid minute. The lingering odour of the cheese omelette I’d just eaten was, all of a sudden, so much less tragic. I once slammed a finger in a door, and the pain was so intense that I nearly passed out. This, right now, was a fun version of that finger-in-door light-headedness. It was like being punched by good. Sure, there was a level on which I knew I’d made a mistake; that this could not be. People don’t just win £1 million. Well they do, but I don’t. It’s the sort of thing that happens to people called Pauline, from Wrexham. I am not Pauline from Wrexham. God I wish I was Pauline from Wrexham.

Even so, I started spending money in my head. Suddenly, London property was affordable. It’s incredible how quickly you can shrug off everyone else’s housing crisis woe, when you think you have £1m. No wonder rich people vote Conservative. I was imaginary rich for nineteen minutes (I know it was nineteen minutes because the National Lottery website kindly times how much of your life you’ve wasted on it) and turned at least 40 per cent evil.

But, in need of a second opinion on whether or not I was – evil or not - rich, I phoned my dad.

“This is going to sound weird,” I said, “but I think I’ve won £1 million.”

“You haven’t won £1 million,” he said. There was a decided lack of anything resembling excitement in his voice. It was like speaking to an accountant tired of explaining pyramid schemes to financial Don Quixotes.

“No!” I said, “I entered the EuroMillions and I checked my results and this thing has come up saying I’ve won something but it’s really confusing and…”

Saying it out loud (and my how articulately) clinched it: my enemies were not going to be looking at butt selfies any time soon. The agonising minutes spent figuring out my mistake paired beautifully with hard, low wisdom tooth throbs.

“Call me back in a few minutes,” I told my dad, halfway though the world’s saddest equation.

Now here I am, below a cat, trying to explain my stupidity and failing, due to stupidity.  

 

“If it’s any consolation,” my dad says, “I thought about it, and I’m pretty sure winning the lottery would’ve ruined your life.”

“No,” I say, cheese omelette-scented breath warming my face, “it would’ve made my life insanely good.”

I feel the cat purr. I can relate. For nineteen minutes, I was happy too. 

Eleanor Margolis is a freelance journalist, whose "Lez Miserable" column appears weekly on the New Statesman website.